Union to Pay After Inquiry Into Dealings With ING

By DANNY HAKIM

Published: June 14, 2006

A powerful state teachers' union agreed Tuesday to pay $100,000 as part of a settlement with Attorney General Eliot Spitzer's office, following an investigation of its dealings with the Dutch financial services giant that bought exclusive access to sell investments to teachers.

The union, the New York State United Teachers, was paid $3 million a year by the Dutch firm, ING Group, and in return endorsed ING's retirement products to its more than 500,000 members.

The attorney general's investigation found that that the union and ING made efforts to hide their close relationship from teachers who were being pushed toward ING's retirement products, which often had high fees. The union originally had a deal with Aetna, which sold some of its businesses to ING in 2000.

The settlement announced Tuesday did not involve ING.

''There will be further developments in the investigation,'' said Darren Dopp, a spokesman for the attorney general.

Dana Ripley, an ING spokesman, said, ''It has been ING's practice to disclose the specifics of its relationship with NYSUT member benefits, and we fully support efforts to improve transparency to customers.''

Richard C. Iannuzzi, president of the teachers' union, said: ''It's clear now that the trust, despite its best intentions, historically could have and should have provided greater disclosure of the fees paid to the trust by ING. Mistakes were made. They will not be made again.'' Mr. Iannuzzi was elected in April 2005, the same month the inquiry began.

The investigation revealed the workings of a benefits trust that was set up by the teachers' union to monitor the relationship with ING, but that did little in the way of oversight, according to the findings.

The trust received about $600,000 a year from ING to pay the salaries of coordinators who counseled teachers. One coordinator, in a 2003 note to a teacher, claimed, ''My pay is not tied in any way to ING,'' even though he was paid entirely by the company.

According to a document from 2001, teachers' calls to the trust about an investment seminar that was supposed to be unbiased were routed to Aetna, but the operators did not state their affiliation.

In another case, a union finance executive rejected an attempt by ING to disclose the relationship to teachers in marketing materials.

''Fiduciaries must place the interests of their clients first,'' Mr. Spitzer said in a statement. ''An office set up to counsel union members on retirement alternatives should always provide objective advice and full disclosure of relevant facts. That did not happen.''

The $100,000 settlement was imposed to cover the cost of investigation. The union has also agreed to make a number of reforms of its procedures, including opening up the bidding for retirement plan endorsements, fully disclosing payments from insurers, allowing members to roll over their savings to new plans free, providing free, objective financial advice and hiring an independent consultant to oversee reforms.